April 03, 2024
INCORPORATION OF A PUBLIC COMPANY IN INDIA
Public companies are one of the most important sector, contributing to the India’s economic growth. These entities plays a critical role in mobilizing capital, fostering innovation, and increasing national growth. Setting up a business as a public company is a significant and complex process.
A public limited company offers shares to the general public and has limited liability. Its stock can be acquired by anyone, either privately through an Initial Public Offering (IPO) or via trades on the stock market. This means that shareholders have a claim to the company’s profits and assets. The Companies Act, 2013 regulates the establishment and working of a public limited company.
CHARACTERISTICS OF A PUBLIC COMPANY
- Member: A public limited company requires a minimum 7 members and there is no maximum limit for the members.
- Director: As per the provisions of the Companies Act, 2013, a public limited company is required to have a minimum of 3 directors and there can be a maximum of 15 directors. One director must be a resident of India. A Resident director is a mandatory requirement for a public company under the Companies Act, 2013.
- Liability: The liability of each shareholder is limited, which means a shareholder of a public limited company is not personally responsible for any loss or debts of the company for any amount greater than the amount invested by them, but the shareholders will be held responsible for their own illegal actions.
- Share capital: A public limited company is not required to have a minimum paid-up capital. However, an authorised share capital should be minimum of Rs.1 lakh.
- Prospectus: According to the Companies Act, 2013, it is required for the public limited companies to issue a prospectus. A prospectus is a comprehensive statement of the affairs of the company issued for public.
INCORPORATION PROCESS
The incorporation process of a public company is divided into several steps:
- Company Name Approval: Choose a unique and appropriate name for a company that complies with the Ministry of Corporate Affairs (“MCA”) guidelines and submit an application for reserving the name electronically through the MCA portal.
- Preparation of Documents: Several key documents are required for incorporation, including the Memorandum of Association (“MoA”) which outlines the company’s objectives and the Articles of Association (“AoA”) which defines the internal governance structure.
- Digital Signature Certificate (“DSC”) and Director Identification Number (“DIN”): All directors must obtain a DIN, a unique identification number issued by the government. Additionally, at least 1 director will need a DSC for electronic filing of documents.
- E-form Filling: The SPICe+ form is a comprehensive electronic form that integrates various applications required for company incorporation, including registration for Permanent Account Number (“PAN”) and Tax Collection Account Number (“TAN”). Filling this form electronically through the MCA portal initiates the incorporation process.
- Certificate of Incorporation(“COI”): Upon successful processing and verification of all documents, the MCA will issue COI, officially registering the company as a public limited company.
DOCUMENTS REQUIRED FOR REGISTRATION
- MoA
- AoA
- Proof of identity of all the shareholders and directors.
- Proof of address of all the directors and the shareholders.
- PAN number of all the shareholders and directors.
- Utility bill of the proposed office i.e. proposed registered office for the company.
- A NOC (No Objection Certificate) from the landlord where the office of the company will be situated.
- DIN of all the directors.
- DSC of the directors.
KEY FINDINGS
Incorporating a public company in India establishes the potential for raising capital from the public and achieving significant growth. By analyzing the unique features of public limited companies, such as perpetual existence, limited liability, and the capacity for unrestricted fundraising from the public, it serves as a compass for entrepreneurs venturing into the expansive landscape of starting a public limited company. By following the procedures outlined above, one can establish a public limited company effectively and efficiently.
HOW WE CAN HELP?
Incorporating a public company in India involves several legal steps and compliance requirements. We can be instrumental in facilitating this process by providing expert guidance and assistance.
- Our team can provide initial consultation to understand the clients’ business goals, structure, and requirements for incorporating a public company.
- We can assist in drafting and filing the necessary documents for company formation, such as MoA, AoA, and other incorporation documents required as per the Companies Act, 2013.
- Conducting due diligence is crucial before incorporating a public company. Our experts can assist in conducting thorough due diligence to identify any legal or regulatory issues that need to be addressed before incorporation.
- Public companies in India are subject to various regulatory requirements imposed by the Securities and Exchange Board of India (SEBI) and other regulatory authorities. Our firm can ensure that the company complies with all the applicable regulations, including those related to corporate governance, disclosure norms, and listing requirements.
Key Contact
Surendra Singh Chandrawat
Managing Partner
